Dollar firm near 18-month highs, as Gulf unrest, US inflation keep investors on edge

The US dollar reached near 18-month highs on October 12, as escalating Middle East unrest and US inflation concerns kept investors on edge. Oil prices fluctuated following Yemen's Iran-backed Houthis increasing strikes on Saudi Arabia, while two tankers were attacked over the weekend. Brent crude futures fell by 0.5% to $104 a barrel, down nearly 45% since the start of the war, and are still around 45% higher than pre-war levels.

The dollar index, tracking the US currency against six others, remained close to last week's 18-month highs at 102.16. US investors added to their bullish dollar positions, with the dollar rising to $36 billion in the week to October 7, up from $8.4 billion three weeks ago. The upcoming US inflation data, released on Wednesday, could significantly influence the dollar's near-term direction.

The Fed raised interest rates last month for the first time since 2023 to curb inflation, while markets closely monitor economic data to gauge potential further policy actions.